On Wednesday, BMO Capital Markets affirmed its Market Perform rating on shares of Freehold Royalties Ltd . shares (TSX:FRU:CN) (OTC: FRHLF), maintaining a $15.00 price target. The firm's analyst highlighted Freehold Royalties (OTC:FRHLF) as a prudent investment choice for those seeking to engage with the North American Oil & Gas sector, citing its high-margin and low-debt profile, alongside a risk-averse approach.
The company, which recently conducted its first investor day since 2021, revealed a more extensive inventory than previously estimated. This, combined with improved Canadian well results, suggests a promising long-term development outlook for Freehold Royalties.
The analyst pointed out the significant undrilled inventory value, which, when combined with proven developed producing (PDP) assets, presents a potential upside of approximately $102 per share. InvestingPro analysis indicates the stock is currently trading near its Fair Value, with a "Good" overall financial health score.
After applying a 10% discount to this potential, based on current activity levels over the next 30 to 40 years in the U.S. and Canada, the value per share stands at $28.60. The current market price reflects only about one-third of this undrilled potential, indicating room for future price appreciation, especially if activity levels increase.
The analyst's assessment underscores Freehold Royalties' ability to offer a stable dividend and the prospects of accretive mergers and acquisitions as it expands its operations in the U.S. This strategic positioning is expected to draw investor interest due to the substantial undrilled inventory and associated value that the company has managed to articulate.
Freehold Royalties' presentation of its long-term development plan and the quantification of its undrilled inventory serve as key takeaways from the investor day, offering a glimpse into the company's future potential and its impact on shareholder value.
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